Aurora Blacktop (“Aurora”) filed this lawsuit, claiming that it is entitled to the proceeds of certain bonds issued by American Southern Insurance Company (“American Southern”) in favor of the City of Yorkville. The district court found that Aurora did not have standing to sue, and dismissed the case. We find that Aurora is not a third-party beneficiary to the bonds because there is no language in the bonds suggesting that American Southern’s obligation runs to third parties. We affirm.
I. BACKGROUND
This case started out as three different actions brought against Ocean Atlantic Services (“Ocean Atlantic”) and American Southern in state court by three plaintiffs. The cases were removed to federal court by American Southern and consolidаted. The district court’s jurisdiction was premised on diversity of citizenship. Only Aurora appealed the judgment of the district court.
Ocean Atlantic is a real estate developer that was building the Westbury East Village subdivision in Yorkville, Illinois. According to the parties’ representations at oral argument, as part of that project, Ocean Atlаntic was required to make certain public improvements that would eventually be turned over to the City of Yorkville for maintenance. Yorkville Subdivision Control Ordinance § 8.02.01 requires a subdivider to post an irrevocable bond payable to the City of Yorkville “to assure the satisfactory installation of required improvements.”
According to Aurora’s complaint, Ocean Atlantic (the contractor) obtained a series of subdivision bonds from American Southern in order to satisfy the ordinance. On June 15, 2006, American Southern (the surety) issued the subdivision bonds in favor of the City of Yorkville “for the purpose of guaranteeing the installation” of public improvements in the subdivision. All of the subdivision bonds (attached to Aurora’s complaint) are identical, except for the amount insured and the specific improvements guaranteed. Each bond provides a list of events or conditions that would entitle the City of Yorkville to deem Ocean Atlantic in default. One of those *715 conditions is “if the City of Yorkville has determined that the public improvements or оther improvements covered by this [bond] have been or are likely to be the subject of liens or other claims by contractors, subcontractors or third parties.” The bonds also provide that the City of York-ville can make a demand on the bonds by “presenting the Surety with a letter from the City Clerk ... demanding performance accompаnied by the certificate of the City Clerk ... certifying the basis for the default and demand on this Subdivision Bond.”
Work on the subdivision commenced, and Ocean Atlantic hired Aurora (the subcontractor) to work on several public improvements. But the project stalled after Ocean Atlantic ran into financial difficulties, and the subdivision was never completed. Several subcontractors, including Aurora, were never paid for the work they performed. The subcontractors eventually recorded several mechanic’s liens on the subdivision property in the amount allegedly owed by Ocean Atlantic.
On June 17, 2009, Ocean Atlantic wrote a letter to the City of Yorkville recommending that it redeem some of the bonds. In the letter, Ocean Atlantic explained that there were “presently three foreclosures pending that will prevent the current owner from completing the [subdivision].” Ocean Atlantic recommended that the bond proceeds be placed into escrow to pay for the release of the mechаnic’s liens and to ensure the completion of the improvements.
On August 31, 2009, the City of York-ville sent a letter to American Southern making a demand for payment on the subdivision bonds. But American Southern never paid up, and the City did not pursue the matter further (even though the bonds contain an attorneys’ fees provision). Aurora then filed suit against Ocean Atlantic and American Southern, purporting to bring its case in the name of the City of Yorkville for its own benefit. Aurora contends that it should be paid out of the proceeds of the bonds.
The case was removed to federal court. American Southern filed a motion to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). The district court granted the motion, finding that Aurora did not have standing to assert claims on the bonds because it was not a third-party beneficiary to the bonds. Aurora appeals.
II. ANALYSIS
A. Appellate Jurisdiction
Early on in this appeal we were concerned that the order appealed from might not be a “final decision” within the meaning of 28 U.S.C. § 1291 because it appeared that the district court’s order failed to dispose of Aurora’s case against Ocean Atlantic, the other defendant in this lawsuit. We ordered Aurora to explain why the appeal should not be dismissed.
Aurora filed a memorandum asserting that we have jurisdiction because the district court dismissed its complaint for lack of subject matter jurisdiction under Rule 12(b)(1) with prejudice, and entered judgment. Aurora also claimed, however, that the case was improperly removed to federal court. American Southern responded that it agreed with Aurora that the order dismissing Aurora’s case is a final appeal-able order, but argued that Aurora waived the removal issue by failing to object below.
The district court dismissed Aurora’s complaint with prejudice for lack of subject matter jurisdiction and closed the case by entering judgment. The dismissal of Aurora’s lawsuit was final, and we have jurisdiction over this appeal.
Banks v. Sec’y of Ind. Family & Soc. Servs. Admin.,
Aurora also forfeited its challenge to American Southern’s defective removal. Aurоra claimed that removal was improper because Ocean Atlantic never consented to removal, and the consent of all defendants is generally required to remove. A motion to remand a ease on any basis other than lack of subject matter jurisdiction must be made within 30 days after the filing of the notice of removal. 28 U.S.C. § 1447(c). Failure to join all defendants when a case is removed to federal court is a waivable procedural defect.
McMahon v. Bunn-O-Matic Corp.,
B. Standing to Sue as Third-Party Beneficiary
In this case, we must decide whether Aurora has standing as a third-pаrty beneficiary to enforce the subdivision bonds at issue. “In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or particular issues.”
Apex Digital, Inc. v. Sears, Roebuck & Co.,
“A contract of a surety involves a direct promise to perform the obligations of another person in the event such person fails to perform as requirеd by his contract.”
Vee See Constr. Co., Inc. v. Luckett,
In Illinois, if a contract is entered into for the direct benefit of a third person who is not a party to the contract, that person may sue on the contract as a third-party beneficiary.
Carson Pirie Scott & Co. v. Parrett,
The Restatement (Third) of Surеtyship and Guaranty provides some helpful guidance in determining whether a subcontractor is a third-party beneficiary to a suretyship agreement. The Restatement distinguishes between “payment” bonds and “performance” bonds. See Restatement (Third) of Suretyship and Guarantee § 69(a) (1996). When a “payment” bond is involved, the contractor typically рromises the owner of the project to pay for all labor and materials, and the surety agrees to be liable with respect to that promise. Id. The laborers and suppliers therefore have rights as third-party beneficiaries against the surety. See id. In contrast, when a “performance” bond is involved, there is no promise to pay lаborers and suppliers of materials. Id. The surety promises to be liable only for the fulfillment of the contractor’s duty. Id. The laborers and suppliers have no rights against the surety because the surety has not promised to fulfill the contractor’s duty to them. 1 Id.
In accordance with these general principles, Illinois courts tend to find third-party benefiсiary status where an agreement contains language to the effect that the surety will be responsible to third parties if the contractor is unable to fulfill its obligation to them. In
Carson Pirie Scott & Co. v. Parrett,
for example, the Supreme Court of Illinois found that a supplier of hotel linens could sue as a third-party beneficiary on a contract between the hotеl owners and a surety because the contract provided that the surety would pay for the goods if the hotel owners could not.
Conversely, subcontractors are generally not accorded third-party beneficiary status where the surety agreement does not contain language suggesting that the surety’s obligation to pay runs to third parties. In
Searles v. City of Flora,
the bond at issue simply stated that the surety would hold the city harmless and pay any loss and damage to the city occasioned by the failure or default of the contractor.
The subdivision bonds at issue herе do not contain any language suggesting that Ocean Atlantic’s obligation runs to anyone other than the City of Yorkville. The bonds state that they are “for the purpose of guaranteeing the installation” of various public improvements. There is no language, for example, to the effect that American Southern is guaranteeing paymеnt for labor and materials.
Cf. Carson,
Aurora urges us to look to Ocean Atlantic’s letter recommending that the City of Yorkville redeem the bonds, as well as to the City of Yorkville’s demand letter, in determining whether the contracting parties intended to benefit the subcontractors. But Illinois law provides that the intent of the parties must be gleanеd from the circumstances surrounding the parties at the time the contract is executed.
Bates & Rogers Constr. Corp. v. Greeley & Hansen,
Aurora also contends that the entire point of requiring a contractor to obtain a bоnd is to ensure that subcontractors are paid. But while the bonds may-have been procured to ensure that the City of Yorkville eventually gets its public improvements clear of liens, this does not mean that American Southern’s obligation under the bonds runs to the subcontractors. “Liability to a third-party must affirmatively appear from the contraсt’s language and from the circumstances surrounding the parties at the time of its execution.... ”
Ball Corp. v. Bohlin Bldg. Corp.,
III. CONCLUSION
The judgment of the district court is AFFIRMED.
Notes
. These principles are illustrated in Restatement with the following examples:
1. P contracts to build a house for O. Pursuant to the contract, P and S both execute a payment bond to O whereby they promise O that all of P’s debts for labor and materials on the house will be paid. P later employs C as a carpenter and buys lumber from L. C and L are intended beneficiaries of S's promise to O.
2. P contracts to build a house for O, and to deliver the house free of liens. In connection with that contract, S provides a performance bond whereby S agrees to fulfill P's obligations pursuant to the construction contract. P later employs C as a carpenter and buys lumber from L, and fails to pay both of them. C and L have no rights against S.
Id.